R&D Cooperation, Innovation Spillovers and Firm Location in a Model of Environmental Policy.

In this paper the reaction of firms to the introduction of environmental charges in a given industry is analysed. Firms may decide either to relocate their plants abroad or to adopt a new environmental-friendly technology. The latter can be either developed by investing in R&D or obtained by buying a licence. We show that, even if domestic firms share the same initial technology, at the equilibrium they make different choices in reponse to the same environmental policy.